Many news reports concerning the “fiscal cliff” speculate a change to the long-standing policy that allows homeowners to deduct their mortgage interest payment from their income taxes could be part of the deal to solve the fiscal dilemma.

The National Association of Realtors wants to ensure that the nation’s 75 million homeowners will continue to receive this important benefit. The national group is asking its members to contact Congress and tell their representatives to keep the mortgage interest deduction intact and to oppose any future plan that modifies or excludes the deductibility of mortgage interest.

Realtors contend the mortgage interest deduction is vital to the stability of the American housing market and economy. The Silicon Valley Association of Realtors, the local professional trade organization representing more than 4,000 members engaged in the real estate business on the Peninsula and in the South Bay, is joining the national group in opposing any change to the MID.

“Reducing or eliminating the MID is a de facto tax increase on homeowners,” says Suzanne Yost, president of the local trade association. “Homeowners already pay 80 to 90 percent of U.S. federal income tax, and this share could rise to 95 percent if the MID is eliminated.”

Current law permits deductions of the interest paid on mortgage debt of up to $1 million on a primary residence and one additional residence. In addition, the interest paid on home equity loans of up to $100,000 may be deducted. Plans to reduce the MID by as much as $500,000 and/or limiting this benefit to a primary residence are being floated around in Congress.

“The MID facilitates home-ownership by reducing the carrying costs of owning a home, and it makes a real difference to hardworking American families. Many middle class homeowners base their annual financial planning on tax breaks such as the mortgage deduction,” says Yost.

Yost explains the MID benefits primarily middle and lower income families–65 percent of families who claim the MID earn less than $100,000 per year; 91 percent who claim the benefit earn less than $200,000 per year.

According to the IRS, more than 70 percent of the mortgage interest payments claimed as deductions is on returns filed by people with incomes between $60,000 to $200,000. Only about 1.4 percent of the total is claimed by taxpayers earning $1 million or more.

“For people who don’t have hundreds of thousands of dollars in savings to buy a home outright, tax benefits like the MID help them begin building their future through homeownership. It’s ridiculous to say that the MID is suddenly part of the deficit problem–the MID has been part of the federal tax code for nearly 100 years,” says Yost.

Progress has been made recently in bringing stability to the housing market. “Any changes to the MID now or in the future could place the housing market and the broader economy under stress, and could effectively close the door on the American dream,” adds Yost.

Information in this column is presented by the Silicon Valley Association of Realtors at silvar.org. Send questions on any topic to rmeily@silvar.org.

A transit village with apartments, retailers, restaurants and a hotel is rising in Milpitas next to The Great Mall, close to light rail and the under-construction BART station. It’s one of several Silicon Valley projects sprouting up near transit.